As a Canadian consumer, managing debt can be a daunting task. One effective strategy to pay off high-interest debt is by utilizing balance transfer credit cards. These cards allow you to transfer your existing credit card balance to a new card with a lower interest rate, often 0% for a promotional period. It can also impact your qualifying for a MORTGAGE!
In this blog post, we'll explore the options for balance transfers in Canada, their benefits, and costs, using a $10,000 example.
**Option 1: BMO CashBack Mastercard**
* 0% introductory interest rate on balance transfers for the first 9 months
* 2% transfer fee (=$200 on a $10,000 transfer)
* Standard interest rate: 19.99% on purchases and 22.99% on cash advances
Example:
* Transfer $10,000 to the BMO CashBack Mastercard
* Pay 0% interest for 9 months
* Pay a 2% transfer fee of $200
* After 9 months, the standard interest rate of 19.99% applies
**Option 2: CIBC Select Visa Card**
* 0% interest rate on balance transfers for 10 months
* 1% transfer fee (=$100 on a $10,000 transfer)
* Standard interest rate: 13.99% on purchases and 16.99% on cash advances
* Annual fee: $29 (waived for the first year)
Example:
* Transfer $10,000 to the CIBC Select Visa Card
* Pay 0% interest for 10 months
* Pay a 1% transfer fee of $100
* After 10 months, the standard interest rate of 13.99% applies
* Pay an annual fee of $29 (starting from the second year)
**Option 3: Scotiabank Value Visa Card**
* 0% introductory interest rate on balance transfers for a promotional period (exact rate not specified)
* Transfer fee: not specified
* Standard interest rate: 16.99% on purchases and 22.99% on cash advances
Example:
* Transfer $10,000 to the Scotiabank Value Visa Card
* Pay 0% interest for the promotional period
* Pay a transfer fee (amount not specified)
* After the promotional period, the standard interest rate of 16.99% applies
**Option 4: TD FlexPay Credit Card**
* 0% introductory APR on balance transfers for the first 18 billing cycles after account opening
* 2% transfer fee (=$200 on a $10,000 transfer)
* Standard interest rate: 19.99% on purchases and 22.99% on cash advances
* Annual fee: $39
Example:
* Transfer $10,000 to the TD FlexPay Credit Card
* Pay 0% interest for 18 billing cycles
* Pay a 2% transfer fee of $200
* After 18 billing cycles, the standard interest rate of 19.99% applies
* Pay an annual fee of $39
**Benefits of Balance Transfers:**
Save on interest:** By transferring your balance to a card with a lower interest rate, you can save hundreds or even thousands of dollars in interest charges.
Consolidate debt:** Balance transfer credit cards allow you to consolidate multiple debts into one, making it easier to manage your payments.
Pay off debt faster:** With a lower interest rate, you can focus on paying off the principal amount, rather than accumulating interest.
Boosts your credit score: **by moving your debt from one to another, it can trigger a credit score increase. Ensure you have NOT maxed out your balance transfer. Good rule of thumb is allow only 65% of the AVAILABLE credit to be used for a balance transfer and or request an increase to limit.
Kiki Berg - Financial Mortgage Planner for 17 years.
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